Malliavin differentiability of the Heston volatility and applications to option pricing
2008 ◽
Vol 40
(01)
◽
pp. 144-162
◽
Keyword(s):
We prove that the Heston volatility is Malliavin differentiable under the classical Novikov condition and give an explicit expression for the derivative. This result guarantees the applicability of Malliavin calculus in the framework of the Heston stochastic volatility model. Furthermore, we derive conditions on the parameters which assure the existence of the second Malliavin derivative of the Heston volatility. This allows us to apply recent results of Alòs (2006) in order to derive approximate option pricing formulae in the context of the Heston model. Numerical results are given.
2008 ◽
Vol 40
(1)
◽
pp. 144-162
◽
2005 ◽
Vol 2005
(3)
◽
pp. 307-322
◽
2005 ◽
Vol 08
(03)
◽
pp. 301-319
◽
2016 ◽
Vol 19
(02)
◽
pp. 1650014
◽
2019 ◽
Vol 38
(4)
◽
pp. 856-871
◽
2019 ◽
Vol 22
(04)
◽
pp. 1950009